Why Patriotism and Your Portfilio Don’t Mix

By Irwin Greenstein

For a while now I’ve been writing that if you can integrate a historic shift into your investment strategy you may come out ahead. The shift is this: that America actually did lose the Cold War.

This became apparent to me about a year ago when we saw the economies of our old Cold War enemies, Russia and China, continue to thrive as our own free market economy literally started to melt down.

Now with Washington bailing out AIG (AIG), it seems that our Cold War defeat is undeniable. The very same foreign-policy package of democracy, free-market capitalism and laissez-faire government that Washington has been peddling to emerging economies and Middle-East despots has turned into a profound embarrassment.

Worse, Washington’s seizure of AIG clearly puts us in the camp of our former Cold War rivals in terms of socialist capitalism.

Why is this important to you as an investor?

Look no further than the hedge fund managers, traders and executives of the Wall Street institutions that now find themselves broke. They conducted themselves like Cold War victors. They acted as though the US was still on top and could get away with anything.

They were empowered by the free-flow of instant information across global networks. They mistook superior technology for superior government, and with this fatal flaw everything came crashing down around them.

Many pundits argue that greed overran the system. In turn, I would say that a lack of humility is a better interpretation. We dominated the markets with the arrogance of Cold War winners, when in fact it is now painfully apparent that we lost years ago.

By contrast, if you look at America through the lens of a Cold War loser, other stock markets become more attractive - not just through a technical analysis but more through qualitative attributes that give you a better long-term perspective of the possibilities.

After World War II, while much of Europe was in ruins and much of Asia was feudal, it was easy for us to believe that we would be on top forever. Certainly the destruction of the Berlin Wall gave us that self-righteous pat on the back and lionized the Cold War doctrine of Reaganonics. And when you look at the Hollywood box office figures and see how much of our entertainment is shipped overseas it sure makes you believe that everyone wants to live like an American.

But does everyone want to invest like an American?

National pride and patriotism are fine, but do they really have a place in your portfolio?

Disclosure: None

Comments

[virilio:]

who wants to play in a fixed game? I can't even analyze the data anymore - with the government as the primary shareholder/regulator the books are cooked all the way up now... they benefit from false positive numbers as much as the company - suddenly the government regs will be asking, yessss its fraud but can we afford to let this company go down for it?

I just don't think it's safe to invest in US markets anymore.

2008 Sep 22 09:26 AM

[CLH:]

Your post is total garbage with no truth. America still runs the world and the others are still trying to catch up. I dont see any Americans going to Russia. However, the Russians are flooding our shores.

Your leftest crap is hate America even though America is the best.

2008 Sep 22 09:38 AM

[Chuck:]

Quote in the office this morning...
"I have a bridge in Alaska that I'll sell ya, cheap!"

2008 Sep 22 09:43 AM

[virilio:]

CLH, your spelling and grammar are sub-prime ...

Americans have moved money in huge amounts directly to Russia through BRIC and Oil/NG investments. It was safer than investing in Fannie/Freddie/AIG/Mor...

The Russians understand how corrupt and unstable their financial sector is and move their money ... Not to the US financial sector but to Monaco. Cayman Islands. Lichtenstein. Isle of Man. Bermuda. Switzerland. Dubai. "America is the best?" It certainly isn't considered the best place to invest money. In 2007, EU banks held 53% of worldwide assets, up from 43% the decade earlier. Sense a trend? Enjoy the next decade.

2008 Sep 22 10:16 AM

[Nikola:]

OK, I think we are done now. This is capitulation. Blaming the market crash on the Cold War.

I think we hit the bottom. Now let's go buy some stocks.

2008 Sep 22 10:28 AM

[theflyscotsman:]

I'd say that's a bit cartoonish, arguing that our system caused this.

No, our profligate spending caused it, admittedly partly driven by the need to fund the Cold War, on which we clearly outlasted our enemy.

"I think we hit the bottom. Now let's go buy some stocks."

Darn straight. I started with AIG.

2008 Sep 22 11:00 AM

[SAF:]

Only thing missing here was the vote for Obama sticker.

2008 Sep 22 01:06 PM

[Steven Hansen:]

you could have said the south really won the civil war, germany and japan the second world war. you did not show cause and effect linkage.

2008 Sep 24 02:30 AM

[FGH:]

What a load of #$%&...why don't you move your leftist rants to the moveon.org blogs and leave the investment advice to those who know what they are talking about!

2008 Oct 28 04:34 PM